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Saturday, 6 August 2011

Starving India gifts $2b to EU (PO)

By M D NalapatAlthough India’s ruling politicians ignore the fact, especially during their frequent travels abroad, the reality is that more citizens of the world’s most populous democracy go to bed hungry each night than do in Sub-Saharan Africa. More than 300 million Indians are malnourished, a testamant to the fact that nearly seven decades in power has not been enough for the country’s leaders to wipe away the poverty that descended on the country during British rule. While several Mughal emperors were cruel, and more than a few of them rapacious, yet in 1820 the Indian sub-continent accounted for 23% of global output. Indeed, the very battleship in which Lord Nelson defeated the French at Trafalgar was made in India. However, colonial policy was designed to choke off local manufactures so as to encourage the import of goods from the UK. Hence by the time the Union Jack was lowered from Delhi for the last time on August 14,1947, the sub-continent was contributing less than 1% to global output. Churchill had further succeeded in ensuring the death of 9 million in famines that rolled across North India during the 1939-45 war with Germany and Japan.

Wealth was drained from India to Europe - principally the UK – for many generations. And now, once again, a similar process is unfolding. While there has been some comment on the Commonwealth Games scam, the reality is that for years, practically every major procurement has been a scam. In the case of the “modernisation” of large airports, for instance, equipment has been sourced mainly from suppliers in Europe, and there is talk within the bureaucracy that a particular political family with close links to a European country was behind several of the contracts. While Home Minister Chidambaram has forbidden the security agencies from monitoring the activities of this family and its relatives abroad, concerned officials say that the latter are acting as middlepersons in facilitating mega-deals between Indian government and private agencies and suppliers based in the EU. Altogether, the volume of such transactions is reported to have crossed $ 6 billion in as many years. Only in the case of the Commonwealth Games procurements has there been any official enquiry into such purchases, and even here, the Central Bureau of Investigation is more concerned about protecting those higher up than the jailed MP, Suresh Kalmadi, from exposure than it is in finding out the truth. Small wonder, as selection to the CBI is made from among those officials most pliable to political and other pressure.With all the money flowing from India towards the EU economies – cash earned not by a disfunctional government nor even by corporates but by the sweat of millions of Indian nationals toiling in foreign countries - it would seem that there was no need for Sonia Gandhi and Manmohan Singh ( the duo who run India) to fork out $2 billion in what is in effect a cash dole to the EU. Even schoolchildren are aware that the money so generously being given to European countries by the IMF will never come back, given the fact that not only the PIGS ( Portugal, Ireland, Greece and Spain) are bankrupt, but Italy and in fact, France, as well. Only by bluff is the EU avoiding default, a bluff in which international rating agencies are playing a shameful role. These have consistently sought to artificially raise the cost of borrowing in Asia by giving low scores to local economies, while keeping borrowing costs low in Europe and in North America by giving

scores that are absurdly high. The US, for example, has a Triple A rating when the country is bankrupt and is relying on China, Japan and the GCC to avoid a slide into financial chaos. China in particular, based mostly on the advice given to the Chinese Communist Party by economists and others trained in the US and Europe, has invested a dangerously large amount in the US dollar and in the Euro. This $3 trillion hoard would have been better invested in real resources across the world than in money assets that have weak fundamentals.

It is understood that both Sonia Gandhi and Manmohan Singh have been eager that India show itself to be a “responsible stakeholder” by forking out cash to the stricken European economies. Generosity to other countries has been a hallmark of the gentle Prime Minister of India. In 1993,he agreed to allow Russia to convert its worthless roubles at a rate many times in excess of what the market - that he constantly talks about - was decreeing. As a result, India has ended up paying a subsidy of nearly $15 billion to Moscow. Tragically, India’s leaders are generous only with the money of the common citizen. They themselves continue to live in the same luxury as did the British colonial rulers in the era before “freedom” came to the Sub-continent. The top leaders travel in special aircraft, at huge cost, while 300 million people in the country starve each night. Each of them has a retinue of several hundred security personnel, most of whom are there only to “shock and awe” the ordinary citizen with the might and majesty of the powerful. The VVIPs stay in huge colonial bungalows, each of which costs upwards of $50 million, while just a few kilometers away are festering slums denied the amenities needed for a proper existence. It is in this spirit of waste for VVIPs and starvation for the poor that $2 billion has been gifted, and with more to follow. The indications are that the total asked for from India is $5 billion, so that the country can be “fully responsible”.

Bureaucrats known for their loyalty to political dynasties have been placed in key posts, so that they may continue to protect their patrons. There is therefore little chance of accountability. Meanwhile, the Sonia-Manmohan team go about seeking to shut down Indian business by constantly raising the cost of borrowing. In just the past year, interest rates for Industry have gone up by nearly 4%. Given that the profit of most enterprises is only about 7%,this means that a higher interest bill has wiped out the bulk of profit. As a consequence, investment in fresh plant and machinery has been stopped, and hiring has slowed down. Under the Sonia-Manmohan team, annual increase in productive employment is less than 10% of what it was under Vajpayee, despite the shrill sounds of “concern for the poor” with which political speeches are so liberally peppered. Should the

Reserve Bank of India continue to follow the Sonia-Manmohan line of ever-rising interest rates ( which is the polocy favoured by the EU, China and the US for India, as it ensures that Indian companies get handicapped in competing globally), then several sectors of the economy are going to get sick within a year, especially Telecom and Infrastructure. The result will be a loss of confidence in the banking system, because of a huge increase in loans that the companies will no longer be able to repay.

On the one hand, companies are ordered to purchase expensive equipment sourced from abroad because of the secret pressure of political families with links to foreign suppliers. On the other, the cost of money has been raised to a level that is making commercial activity un-economic. Not that any of this is of concern to Finance Minister Pranab Mukherjee, the man who in the 1980s - again as Finance Minister - argued against colour television technology being developed in India, “as citizens should make do with black & white television”. Of course, it would be wrong to blame Mukherjee, for the inhabitants of Raisina Road ( India’s Beltway) now that the hapless Finance Minister can do little other than obey “orders from the top”. Meanwhile, foreign suppliers based in Europe have worked out an effective way of competing with cheaper products sourced from Asian countries. They ensure that their intelligence and security agencies pass on warnings about Asian suppliers to their Indian counterparts. Seven decades after “freedom”, India’s security agencies still believe implicitly in what they are told by UK, French and other agencies. As a result, while European suppliers are getting Red Carpet treatment, Asian suppliers are being blocked from competing,” on grounds of national security” which of course no one can argue about, and the reasons for which are never made public. And with good reason, for the fact is that several such decisions have been taken for commercial reasons rather than on genuine grounds of national security. It is a sad development when the Hidden Hands behind mega-procurement from abroad can manipulate agencies so as to ensure the success of the suppliers that they have links with. These same foreign companies also use Indian agents to blacken the reputation of those few Indian agencies that refuse to cooperate in their selfish designs. Recently, there has been a campaign of calumny against selected security agencies, carried out by known agents of foreign countries and enterprises, a campaign in which an unsuspecting media has participated In the midst of all this confusion, perhaps a further $3 billion gift of cash will be sent from starving India to well-fed Europe via the IMF. Truly, the world is an amazing place! http://pakobserver.net/detailnews.asp?id=107163

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About Prof. M. D. Nalapat

Prof. Madhav Das Nalapat (aka MD Nalapat or Monu Nalapat), holds the UNESCO Peace Chair and is Director of the Department of Geopolitics at Manipal Academy of Higher Education, India. The former Coordinating Editor of the Times of India, he writes extensively on security, policy and international affairs. Prof. Nalapat has no formal role in government, although he is said to influence policy at the highest levels. @MD_Nalapat

MD Nalapat's anthology 'Indutva' (1999)

In 1999, Har-Anand published Indutva an anthology of MD Nalapat's 1990s columns from the Times of India. The individual columns are posted here, in 1998 and 1999 of the blog archive, though the exact dates of publication are uncertain.